smartmoney.com
When a put or call option expires, you treat the premium payment as a short-term capital gain realized on the expiration date. This is true even if the duration of the option exceeds 12 months. For example, say you wrote a April 5, 2011, put option at $25 per share for 1,000 shares of XYZ Corp. for a $1,500 premium. This creates an obligation for you to buy 1,000 shares at a strike price of $25. Fortunately for you, the stock soars to $35, and the holder wisely allows his option to expire. You treat the premium as a $1,500 short-term capital gain. Report it on Part I of Form 8949 as follows: Enter the April 6, 2010, expiration date in column (c), the $1,500 as sales proceeds in column (e), "expired" in column (f). If you wrote the option in the year before it expires, there are no tax consequences in the earlier year.
I believe that held call options can qualify for long term capital gains but there are rules that disallow this also. I currently have some 2014 calls and would have to read the rules again but these I should get the long term capital gains treatment for my 2014 short puts I expect short term gains.
I have not read through in a while. Lots of ways to turn a gain into short term using options. Anyone have a better web link? |
